Before the financial crisis, many central bankers and economists were, it’s now clear, living in a fantasy world, imagining themselves to be technocrats insulated from the political fray. After all, their job was to steer the economy between the shoals of inflation and depression, and who could object to that?

It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority. And, as a result, monetary policy is as bound up in class and ideological conflict as tax policy.

The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.

The 85 richest people in the world, who could fit into a single London double-decker, control as much wealth as the poorest half of the global population– that is 3.5 billion people….

A greater concentration of wealth could—if unchecked—even undermine the principles of meritocracy and democracy. It could undermine the principle of equal rights proclaimed in the 1948 Universal Declaration of Human Rights.

Pope Francis recently put this in stark terms when he called increasing inequality “the root of social evil”.

And this:

Some of the greatest problems, still outstanding today, lay with the so-called too-big-to-fail firms. In the decade prior to the crisis, the balance sheets of the world’s largest banks increased by two to four-fold. With rising size came rising risk—in the form of lower capital, less stable funding, greater complexity, and more trading.

This kind of capitalism was more extractive than inclusive. The size and complexity of the megabanks meant that, in some ways, they could hold policymakers to ransom. The implicit subsidy they derived from being too-big-too-fail came from their ability to borrow more cheaply than smaller banks—magnifying risk and undercutting competition.

Answer: IMF Managing Director Christine Lagarde, in a speech to a conference on “inclusive capitalism” on May 27. See the transcript of her speech here. For more on changing spirits of the times, see here.

We are in an age of global oversupply: an oversupply of global labor (hence high underemployment); an oversupply of global productive capacity (hence ultra-low inflation); and an oversupply of global capital (hence low interest rates)….

[O]ne can’t properly understand the financial crisis without appreciating how the rise of the emerging nations distorted the economies of rich countries. And you can’t chart a course to more growth and stability in the developed world without recognizing that many of these distorting forces are still at work. Cheaper credit through monetary easing, for example, doesn’t yield much in an era when cheap capital already exists in abundance.

What are CDOs (collateralized debt obligations), anyway? Paddy Hirsch of Marketplace explains how financial institutions used them to build the house of cards that came tumbling down five years ago and plunged the world into the worst economic crisis since the Great Depression.

Jason Sattler writes that Senator Elizabeth Warren is asking a good question:

Why does the government give the big banks a better deal than it gives students?

It’s question so perfect that people can’t stop talking about it.

The first standalone bill from Senator Elizabeth Warren (D-MA) would not only prevent student loan rates from doubling, it would cut them down to the same rate the Fed charges banks to borrow money overnight for the next 12 months. And the idea has taken off like wildfire, with more than 400,000 people signing on to support the legislation.

Even while scholarship has exposed the fallacy of austerity economics and this news has reached wide audiences through Twitter and the Colbert Report, the United States government is embracing austerity’s policy prescriptions… The ghost of bad austerity economics continues to haunt, and even to drive, the living.

The revelation by UMass-Amherst researchers that a key Harvard study used to support austerity economics was based on sloppy (mis)use of data has created a sensation in the media and the economics profession. Paul Krugman explains the selling power of junk economics:

The intellectual edifice of austerity economics rests largely on two academic papers that were seized on by policy makers, without ever having been properly vetted, because they said what the Very Serious People wanted to hear.

Writing in The Guardian, Econ4 team member Juliet Schor explains the economic logic of a shorter working week:

In the models of neo-classical economics times like the present are assumed away. But when we’re actually living through them, we need to recognise that measures that result in higher hours can be counter-productive by creating more unemployment and investor pessimism. Similarly, responding to shortfalls in pension programs by asking people to stay in the labour force more years further dis-equilibrates the market by creating more demand for a limited number of jobs.